Tuesday Profit From Rebound

As previously mentioned  the Nasdaq and FANG was down for the past 3 days  They opened up today, but had a pull back that lasted until 10:20am when the tech stocks broke out to the upside. CNBC's Jim Crammer said this morning that it would be led by Facebook and that is what happened as they identified accounts used to manipulate the upcoming midterm elections.

Alphabet (GOOGL) opened up, dropped sharply then moved up to 1237 then dropped below the prior to earnings high of 1221 to 1216 then took off to the upside. It looked like it was going to stall around the morning high then shot past it to 1241. From that point I ended my trade for the day because there was not going to be a predictable direction since everything will pause for Apple's earnings after the market close. Here are the charts for the trade.

Monday Options Profit

More pain came Monday as FANG took another turn down. Facebook got as low as 166.50 which is close enough to the 165 mark that I said it was a screaming buy. Amazon, Alphabet and Netflix continued downward also. I see this continuing a little more as they will retrace to prior earnings highs for Netflix and Alphabet.

I traded options on Alphabet (GOOGL) where I saw it dip down at open, come back near the open price and then continue downward. Here are the charts and how to trade it. The first is the chart showing the 1 minute interval where you find your entry point.

 Next you will see the 5 minute interval chart which determines how long you stay in the trade.

Why I Sold Ford

I have felt strongly about Ford and being a positive brand for the future for a number of reasons. Those reasons include the technology they employ in their cars and trucks is second to none and they planned for the future by not needing bail out money when GM failed in the last recession. Ford has continued to strive to improve profit margins, but feel that it will come with a longer term cost than the $11 billion they are using to restructure the business.

My argument for Ford's innovation was the Ford Fusion Hybrid which is a stylus looking vehicle that

gets comparable gas mileage to the Toyota Prius. Ford was one of the first auto makers that included radios that were compatible with either Android and Apple phones. There is so much tech and safety involved with Ford it would require a small book however in Ford's most recent restructure plan eliminates the Fusion along with all other cars except for the Mustang and a different version of the Focus so they may focus on more profitable trucks and SUV's.

Ford getting rid of the Fusion is not the reason why I am selling Ford, but with rising oil and fuel cost and an economy that will slow down, more people will be moving to economical sources of transportation. When the economy is going well, people spend more and tend to over spend to the point when things change they can not adjust quick enough. I feel Ford is going to be guilty of this and get caught with their pants down as they are going to sell these expensive trucks and SUV's that most will not be able to afford.

Affordability might be the word for the shareholder also as Ford is already trading at historic lows and has claimed to take a $11 billion charge to restructure the business. A large charge like that might put the dividend in jeopardy and makes Ford a less attractive stock to own. On the other hand, if Ford restructures it's business to the point where other auto makers are forced to copy their design, they will be ahead in the long run. That sounds good, but as interest rates rise, the economy grows more, and stocks will become overbought and subject to fail to create another recession. We might be years away from that, but when it does happen, spending will shrink. When spending shrinks, the auto makers feel it the worse. Ford will probably end up on top, but in the short term has more pain to endure.

FANG Exposed - Part 5

So far I have said why Facebook and Alphabet are great investments and why I would not invest in Amazon. Now here is my stance on Netflix.

Company	Facebook	Alphabet	Amazon	Netflix
Ticker Symbol	FB	GOOGL	AMZN	NFLX
	A	B	C	D
Earnings Per Share	6.8143	37.2373	6.3429	2.3755
Price to Earnings Ratio	30.95	32.52	284.1	152.67
PE/Growth	1.34	1.89	13.15	2.78
Institutional Ownership	71%	78%	56%	77%
Gross Profit Margin	86.04%	57.41%	37.77.%	38.13.%
Long-Term Debt to Equity	0	2.46	120.59	185.52
Return on Assets	25.54%	13.39%	3.04%	5.46%
Return on Equity	28.79%	16.84%	11.86%	28.09%

Everyone loves Netflix! Netflix raised their price a few years ago and they lost membership. They recently increased their membership price and the market did not flinch. Netflix is available on almost every smart device to watch old television shows and new and old movies. Netflix has spent a ton of money on new content and it has helped grow and maintain membership.

All of that sounds good so why wouldn't I be a long term investor of Netflix?

• Price to earnings ratio is too high. To bring the PE Ratio down to 30 means it is trading 5 times higher than it should which would make it's price around $70/share. At that price I would be a buyer.
• Debt to equity is so high as Netflix creates their content by paying from debt issuance. So many other companies have content but don't have the platform. Hopefully it works out for Netflix, but this point brings me to the next.
• Companies with tons of content are looking to create a platform to compete and take market share from Netflix. Disney, AT&T, and everyone else is looking to take Netflix down. The leader to watch for is Disney as they have a ton of content, acquired more with the Fox acquisition and acquired a strong platform in Hulu that came with Fox.

Cord cutting has grown lead by Netflix and their content is top notch. The membership fee for Netflix is reasonable although it is higher than Amazon Prime, but Amazon is separating their services to charge the user more money. The biggest headwind to Netflix is competition, but their biggest advantage is their unlimited world wide growth potential. 

Netflix is great to buy on dips and sell on highs, but I would not be a long term investor of Netflix. A small dip of subscribers could cut the stock price of Netflix in half.

Facebook Loss Means Google Win

• The biggest news Wednesday is what took over the news on Thursday is Facebook's decline in market value. The decline was based on slowing growth and a miss on the number of active users by 20 million. That sounds large if you didn't know that they still has 2.33 billion active users. Regardless Facebook had a huge decline that pushed down technology stocks at the open. Most recovered but Amazon went down in anticipation of their earnings report release after the market close.
• Amazon's earnings sounded like a blow out quarter, but the revenue number missed what analysts expected. It went up, but it wasn't crazy up as in past earning announcements. 
• The winner appeared to be Alphabet (GOOGL) as it opened lower for the 2nd day in a row to break out to a new high. So let's break down the options trade for profit. When it opened, it shot up so it is best to wait for it to come back to where it started since looking at the chart for 1 minute stochastic was at the top and the 5 minute was at the bottom. This is a sign that it will come back to where it started the day around 1264 which it bounced off 2 times just before 10am.  
• 
  
• Final thoughts on Facebook: Facebooks numbers were the best of the FANG stocks as I shared with in my blog this week. Facebook displayed that it is still growing but not at the pace as expected. Mark Zuckerberg shared this previously. Should the stock of Facebook fall to 165, it is a screaming buy. Even if the margins are cut in half, it is still without debt and very high margins. 

FANG Exposed - Part 4

I hope you have a better understanding of the investments that make up FANG after reading my blog. I discussed why Facebook and Alphabet (GOOGL) are buys and now Amazon.

Company	Facebook	Alphabet	Amazon	Netflix
Ticker Symbol	FB	GOOGL	AMZN	NFLX
	A	B	C	D
Earnings Per Share	6.8143	37.2373	6.3429	2.3755
Price to Earnings Ratio	30.95	32.52	284.1	152.67
PE/Growth	1.34	1.89	13.15	2.78
Institutional Ownership	71%	78%	56%	77%
Gross Profit Margin	86.04%	57.41%	37.77.%	38.13.%
Long-Term Debt to Equity	0	2.46	120.59	185.52
Return on Assets	25.54%	13.39%	3.04%	5.46%
Return on Equity	28.79%	16.84%	11.86%	28.09%

Jim Crammer coins Amazon as being the death star with the expectation that any business that

Amazon gets into, it dominates. Many think that Amazon has low overhead because it doesn't have any storefronts, then they bought Whole Foods. Most people don't understand that Amazon has many warehouses and many people working at these local locations.

I believe Amazon is working smarter when they partner up with stores like Khols and Best Buy instead of trying to buy more physical locations. Amazon's best location is their website which until their most recent Amazon Prime Day has worked without a hiccup. I see their biggest strength is also their biggest liability which is the Amazon Prime subscription. The market did not see a problem with them raising the cost of Amazon Primer Membership while other companies have used as a point of attack.

EBay and Walmart constantly attack the membership price of Amazon Prime as they provide free shipping with low minimums without paying a membership fee. Walmart has many locations nearby where you may return or exchange merchandise and Amazon does not.

Amazon's web services is a huge money maker, but as the world gets more technologically advanced, there will be more choices to use including Google and Microsoft which are taking market share. Amazon is great for business, but where it enters, it creates opportunity for others to do it better for less.

Speaking of less, Amazon might be attractive if it were trading around $180/share which is 100 times less than it currently trades as indicated by it's PE Ratio. It is a growing company and is why it still has 56% institutional ownership, but it might be considered a value company if it were trading at a more reasonable share price. Amazon's earnings per share and return on equity look nice, but company debt flares a red flag when comparing to other Facebook and Google.

The last problem is when Amazon produces their earnings and everyone sees the growth, does the stock price need to reflect an increase from this level?

Alphabet (GOOGL) Day Trade to Profit

• Another day when Alphabet (GOOGL) opens down big creates great opportunities to profit from buying Call Options. Yesterday Alphabet closed at 1258 and today it opened at 1249 where it bounced from yesterday. It went straight up to 1267 at 10am before pulling back some.
  
• You could have bought another call option at 11am and if you had the guts to hold it until the end of the day you would be quite happy. There was too many opportunities for it to falter that this would not be a good trade. 
• Facebook reported earnings after the market close today where it beat on earnings but was driven down because they reported active users increase to 2.33 billion instead of 2.35 billion. This drove everything down after hours and might create another buying opportunity for Alphabet tomorrow morning. Amazon broke to a new high today and reports earnings tomorrow afternoon. We might be due for more fake pin action on Friday.

FANG Exposed - Part 3

Yesterday I broke down Facebook and today I will go through Alphabet (GOOGL).

Company	Facebook	Alphabet	Amazon	Netflix
Ticker Symbol	FB	GOOGL	AMZN	NFLX
	A	B	C	D
Earnings Per Share	6.8143	37.2373	6.3429	2.3755
Price to Earnings Ratio	30.95	32.52	284.1	152.67
PE/Growth	1.34	1.89	13.15	2.78
Institutional Ownership	71%	78%	56%	77%
Gross Profit Margin	86.04%	57.41%	37.77.%	38.13.%
Long-Term Debt to Equity	0	2.46	120.59	185.52
Return on Assets	25.54%	13.39%	3.04%	5.46%
Return on Equity	28.79%	16.84%	11.86%	28.09%

Where Facebook is on every smart device, the same can be said true for Google. Google owns Android which is on 70% of all phones and has a strong presence on Apple devices also. Google provides free services through apps ranging from maps to translation and has it's assistant built into everything. Google owns the best speaker not because of the sound. Google Home is the best speaker because of the integration of Google's Voice Assistant.

Google also owns Waymo which is projected to be huge by itself. It also owns Nest which has the best thermostat and now video door bell. Most importantly Google owns YouTube which is it's best performing section next to search. To double down on YouTube, Google owns YouTube TV which takes advantage of the growing space of cord cutters.

Based on all of this, you probably understand why institutional ownership is the highest for Google among the members of FANG. When looking at the numbers, the Earnings Per Share scream buy coupled with the low amount of debt the company carries.

Google partners with a number of companies including the largest retailer in the United States Walmart. Do they have a monopoly? I don't know, but can you make it a day without searching Google or using a Google product? I can't either, so it must be a buy.

Trading Google and Verizon Post Earnings

Alphabet, Google's parent company, had a blow out 2nd quarter earnings report. The stock shot up post market to 1272 and opened near there on Tuesday morning. It wasn't necessarily a buy there. Based on the sharp movement downwards, it indicated that it would go down. The best bet would be to buy a Put option when it comes back near where it opened which happened around 9:40am. If you bought that, you could hold it for 20 minutes and sell it for a huge profit at 10am.

At 10am you could have bought Call options on GOOGL and held those for 20 minutes and sold those for a huge profit when it returned to 1271 and then be done for the day. Below show the same chart broken down by 1 minute intervals. The up and down movement was too crazy for the rest of the day even though it trended all the way down to 1249 before turning back up.

Verizon reported great earnings before the market opened Tuesday morning. It opened higher, but fell hard below Monday's close. This was a buying opportunity because it was due to go back up near where it opened. You could have bought Call Options with August 10 expiration for around 20 cents and turn around and sold them for 50 cents by the end of the day. If you did that with 100, you would be quite happy.

I hope this helps as this is the first blog where I broke down how to trade it.

FANG Exposed - Part 2

Which did you pick? Was it A or B?

What is the order of FANG on the chart that I shared yesterday?

Here is the chart with the companies listed above:

Company	Facebook	Alphabet	Amazon	Netflix
Ticker Symbol	FB	GOOGL	AMZN	NFLX
	A	B	C	D
Earnings Per Share	6.8143	37.2373	6.3429	2.3755
Price to Earnings Ratio	30.95	32.52	284.1	152.67
PE/Growth	1.34	1.89	13.15	2.78
Institutional Ownership	71%	78%	56%	77%
Gross Profit Margin	86.04%	57.41%	37.77.%	38.13.%
Long-Term Debt to Equity	0	2.46	120.59	185.52
Return on Assets	25.54%	13.39%	3.04%	5.46%
Return on Equity	28.79%	16.84%	11.86%	28.09%

So now I will address each of them for the next couple of days starting with Facebook. No matter how many people say they are not using Facebook anymore, there are still 10 times more that are using it. That number might be small, but if you do not use Facebook, do you use Instagram or What's App?

I don't believe that Facebook has really begun to try to monetize Instagram or What's App. Companies pay for advertising with Facebook because they allow you to market your service and products specifically to demographics that you desire. Therefore I believe Facebook has a lot of room for growth in sales numbers.

Facebook has the best Return on Assets of the FANG members and it looks even better when it doesn't have any debt. Facebook is growing and without fines and regulation, it will continue to grow. Even with an increase to fines or regulation, Facebook's financials can absorb it and continue to grow.

The drawback of Facebook which might be considered a strength is it is a service company with no physical products. Instead Facebook may be found everywhere from phones, tablets, televisions, computers and a variety of smart devices. 

FANG Exposed - Part 1

Jim Crammer coined the acronym FANG for Facebook, Amazon, Netflix and Google (now Alphabet) and many follow these stocks for gains when the rest of the market stalls. I find it funny when these companies are similar but there financials are different. So let's take some fundamental numbers of them and you tell me which one makes sense based on the numbers to invest:

	A	B	C	D
Earnings Per Share	6.8143	37.2373	6.3429	2.3755
Price to Earnings Ratio	30.95	32.52	284.1	152.67
PE/Growth	1.34	1.89	13.15	2.78
Institutional Ownership	71%	78%	56%	77%
Gross Profit Margin	86.04%	57.41%	37.77.%	38.13.%
Long-Term Debt to Equity	0	2.46	120.59	185.52
Return on Assets	25.54%	13.39%	3.04%	5.46%
Return on Equity	28.79%	16.84%	11.86%	28.09%

Tune in tomorrow to find out which is which, but which one would you invest your money into?

To me, A is the winner with B closely behind. I remember Crammer mentioning that he likes companies with a PEG (Price to Earnings Growth) over 2, but his favorite company Apple is below that. I feel that a number below 2 might be better because if your PE ratio is overextended, it doesn't matter what your growth number is because your PEG will still be high.

When I was in school, I was told that you want companies that have a PE ratio below 10. These days those only exist in high dividend companies that don't have growth. Dividend are great, but growth is how you build wealth. Therefore PE ratio along with the Institutional Ownership would eliminate number 3.

The bottom numbers are interesting and exciting. Company A has no long term debt where company C and D appear to be leveraged heavily. Would Company C and D be in this group if they didn't have so much debt?

If you take out the first line, Company A beats the rest of FANG. Ultimately you invest in shares of companies to share their earning power, so Earnings Per Share puts Company B far ahead of the rest.

Based on these numbers, which one would you take?